My wife and I have various assets such as our home and our savings. The question of who owns what can be surprisingly complex. The reason for this complexity is that there are three different points of view on answering this question. Here I look at our assets from each of these points of view.
How We See Ownership
Our view of ownership is quite simple: 50/50 for everything. I know that some couples choose to have his and hers money, but that’s not how we do it. When it comes to paying for things, we decide who will pay based on convenience. If my wife needs some cash, I hand her some without bothering to do any kind of accounting. I think this works well for us because we are both quite frugal.
Control of Assets
Just because the ownership of our assets is 50/50 doesn’t mean that we each exercise 50% control of all assets. To pick a trivial example, I don’t touch her toothbrush. It might be 50% mine in an ownership sense, but in terms of control it’s 100% hers.
This carries over to our bank accounts and trading accounts. I control 100% of the accounts in my name, and my wife controls 100% of the accounts in her name. We do have a joint account, but this is strictly so that my employer will deposit part of my pay in the account. I don’t touch this joint account and my wife would be justified in being upset if I did touch it without discussing it with her first.
I know that some couples benefit from using the same joint account because it forces them to coordinate their spending and ultimately reduces wasteful spending. This is not our problem. I wouldn’t want to be uncertain about how much money is in my account if I misunderstood my wife’s intention to spend some money. She feels the same way about me mucking about in her bank accounts.
This doesn’t mean that I can spend any amount from one of my accounts whenever I feel like it. The money is half hers in an ownership sense as we see it. We discuss any large purchases in advance. The definition of a large purchase has changed over the years, but I’d say that the threshold is probably around $1000 now.
For efficient tax planning, it’s important to understand how the Canada Revenue Agency (CRA) views ownership. For example, because our joint account holds money I earned, CRA views any income from investing this money as my income. Some people think that the income would be split 50/50 for a joint account, but this isn’t true.
When we decide to retire, we’re better off financially if my wife and I have roughly equal-sized portfolios. But it does no good if I just give her a pile of money. CRA would just attribute any investment gains back to me. Our solution is that we don’t spend my wife’s income. It goes into her trading account to be invested. We use my income exclusively to pay household expenses. Whatever is left from my income gets invested in my trading accounts.
The way we structure our bank accounts and trading accounts is designed to give us what we want from each of these three points of view. Our approach has worked well for us so far. Your mileage may vary.